Daily Commentary

MarketMinder’s View: Look, we haven’t bugged US Treasury Secretary Scott Bessent’s office, and we aren’t clairvoyant, so we don’t actually know the specific reasons the US helped Japan’s Treasury with its intervention to strengthen the yen. But we don’t think the reasoning posited here (and many other places) passes muster. The argument goes like this: Since Japan is the country with the largest stockpile of US Treasury bonds and yentervention by Japan’s Treasury would generally require selling dollars and buying yen, this piece suggests the US stepped in to keep Japan from dumping a boodle of Treasurys and driving US borrowing costs skyward. If that is indeed the reason, it is a silly one, because this is hardly the first time Japan has intervened to support the yen. They did so earlier this year. And in 2024. And and and. None of these efforts ended with sky-high US Treasury yields and debt doom. Or, for that matter, with Japan’s pile of US Treasurys diminished—Japan still owns a little more than it did at the end of 2023, per the US Treasury’s data. As for parallel chatter that the US did this to curb its trade deficit with Japan, feeding on the myth that a weak currency makes Japan’s exports boom and imports sag, US exports to Japan hit a fresh high last year despite the weaker yen. This whole saga strikes us as a tempest in a teapot.

MarketMinder’s View: Here we go. “A coalition of 25 US states sued the Trump administration on Monday over new tariffs pegged at 10% to 12.5% on goods from 60 trading partners, calling them a pretext for replacing import taxes struck down by the supreme court in February. The states are asking the US Court of International Trade to halt the tariffs, declare them unlawful and order refunds of duties that have already been paid.” President Donald Trump enacted these tariffs under Section 301 of the Trade Act of 1974, which lets the White House apply tariffs against countries whose trade laws discriminate against US goods. The White House argues the new tariffs, aimed at countries with no or unenforced laws against importing goods made with forced labor, fits Section 301 parameters. The states disagree, and it now seems the courts will decide. As always, we are neutral in political matters like this, preferring no party nor any politician and assessing developments for their market and economic implications only. And in this case, we think there is little to see. Markets moved on from tariff news long ago, barely blinking at the February court decision, refund orders and replacement tariffs. We guess completing the legal process here will ease some uncertainty about these latest tariffs’ staying power, however it goes. But businesses seem to have shrugged it all off long ago, swallowing the added tariff burdens and moving on.

MarketMinder’s View: “The Federal Reserve’s 12-person policy committee meets eight times a year and votes on whether to lift, lower or hold borrowing costs. [New Fed head Kevin] Warsh raised the idea of changing the frequency of those meetings at the Fed’s gathering this week, according to four people with knowledge of the discussion who were not authorized the speak publicly.” Now this is all just a rumor, which the Fed hasn’t confirmed, and it may come to nothing. The Fed could mull meeting fewer times, then keep the status quo. Either way, this article does a decent job giving the current lay of the land, in the process showing why the official meeting frequency isn’t as important as you might think (even if the article says otherwise in places). For one, the existing statutes mandate only a minimum of four meetings per year, which Warsh has already said is too seldom. And whatever the number the Fed chooses, it can meet ad hoc to deal with rapidly changing conditions as policymakers see fit—as it did during the first rumblings of subprime mortgage trouble in the mid-2000s, the acute phases of the global financial crisis in 2008, COVID lockdowns in 2020 and more. These guys and gals are really good at having last-minute conference calls. So we disagree with the notion that fewer Fed meetings could reshape “the way the Fed steers the economy and potentially making it less responsive to changes in inflation and the labor market.” (Setting aside our major disagreements with the idea the Fed or anyone “steers” a market economy.) As the article also notes, any three Fed members could schedule a meeting when they see fit. And given how much Fed people yap between meetings, we doubt fewer meetings actually means less “transparency,” which hasn’t done anything for Fed credibility or policy success anyway. Overall, a less talkative Fed looks like a big opportunity for reality to exceed dreary expectations. For more, see today’s commentary, “Digging Into Last Week’s Fed ‘Credibility’ Concerns.”